Court Ruling Victory For Lykes
Lykes Bros. Steamship Co. chalked up a victory on May 8 when Chief Judge Alexander L. Paskay ruled against a motion filed earlier in the same week by a secured creditor group holding prepetition claims of approximately $13 million against Lykes. Earlier, on April 23, the group had reportedly entered into an agreement with Lykes whereby Lykes would pay the lender group approximately $3 million between April 23 and August 31. Lykes had reportedly already paid approximately $750,000 to the secured creditor group during the Chapter 11 case. Shortly after the secured creditor group filed a motion to convert the case to Chapter 7, the bankruptcy court began to hear evidence.
Conversion was opposed by all creditors present, except the secured bank group. Genstar Container Corp., Transamerica Leasing, New Orleans Marine Contractors, Stevedoring Services of America, South Carolina State Ports Authority, the Port of Houston and American President Lines were reportedly among the creditors opposing conversion. Numerous witnesses, including Charles A. Sadoski, chairman of the Unsecured Creditors' Committee, and Ernst & Young accounting firm partner Mark A. Hopkins, testified that Lykes has the ability to successfully complete its reorganization.
Ruling on the motion, Judge Paskay stated: "There is hardly any doubt that a conversion at this time would not only be premature, based on these factors, but would not be in the interests of the general estate, nor upon serious reflec- tion, in the interests of the banks." Offering comment on the ruling, Lykes President Joe B. Freeman stated: "This is not just a victory for Lykes, it's a resounding victory for the legal process that prevents one creditor from seeking to gain any special advantage in a reorganization case. With today's ruling, Lykes' customers, vendors and other business partners can expect continued progress as we work toward completing our reorganization successfully."